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Opinion
June 21, 2019 www.intellinews.com I Page 21
in March 2019 after a lot of political wrangling and many large cities of Romania (starting with its capital Bucharest) have serious financial dif- ficulties (“undeclared bankruptcies” according to some key mayors). The poor revenue collection was also a result of appointing very inexperienced managers at National Agency of Fiscal Adminis- tration (ANAF), the state revenue collection agen- cy. The dismissal of such inexperienced manage- ment was finally done in June 2019, but precious time was lost in revenue collection for this year.
Romanian society should understand that living on debt (in this case, on foreign debt) is only a pal- liative solution. This is what Romania was doing over the last three decades since the events of December 1989. Sooner or later somebody should pick up the bill and repay the debt. The graph below is a very expressive illustration of the worri- some trends of the foreign debt, on one side, and of the international reserves, including gold, on the other side. The gap between foreign debt and international reserves has increased. The level
of the international reserves alone decreased
in absolute terms from €34.2bn as of end-2016
to €33.7bn as of end-April 2019. Moreover, the service of the foreign debt required payments of €22bn during the first four months of this year, according to the NBR. Two more key indicators: the foreign debt service ratio and the coverage of imports with international reserves also worsened to 16.6% (from 21.2% in 2018) and to 4.8 months (4.9 months as of end-2018), respectively. The coverage of short term debt with international re- serves also declined during the first four months
of 2019. The Romanian authorities should be con- cerned on all these counts, but this has not been the case so far. Under such circumstances, it is very likely that the government will have to borrow externally, as its relationship with the commercial banks in the country is at a very low level. The RO- BOR scandal, to cite just one example, and many other populist measures contributed to this.
Also, as previously signalled, the structure of the Romanian foreign debt by maturities suffered major changes during the last five years. For instance the share of long term debt decreased from 80.41% as of end-2013 to 67.78% as of end-April 2019, while the share of the short term liabilities increased accordingly during the same period from 19.59% to 33.22%. This could be risky as the service of the short term debt tends to be more difficult to anticipate, service and control. Moreover, the news that Romania might consider selling some of its gold (103.3 tonnes as of May 2019), even if not true, had very negative connota- tions. A legislative initiative to bring the Romanian gold from London (some 60% of total holdings are deposited with the Bank of England) to Bucharest has unclear status in the Romanian parliament as one of its initiators is now in jail.
Starting from January 1, Romania holds the rotat- ing presidency of the Council of the European Un- ion for six months up to June 30, but the achieve- ments have been very modest. Also, starting with 2018, a set of measures to adhere to the euro zone were announced by the Romanian authori- ties, but unfortunately this process is not driven by the experienced staff of the NBR, as it should have been. The fiscal sector of the country should be put in order first and foremost. All in all, the actions and results so far have not been very en- couraging. There is an evident lack of experienced governmental staff or lack of will to handle such tasks properly.
It is fair to mention that compared with other countries in transition, Romania is not a heavily indebted country. There are various estimations of the increasing ratio of its foreign debt to GDP, with